Loan Comparison Calculator
Put up to three loan offers side by side — amount, rate and term for each — and compare the monthly payment, total interest and total cost to find the cheapest.
Cheapest Loan Overall
How It Works
Comparing loans by their monthly payment alone is one of the most expensive mistakes in personal finance. A longer loan always has a lower monthly payment — but it also charges interest for more years, so the total cost is usually higher. The only fair comparison looks at three numbers for each loan: the monthly payment, the total interest, and the total cost (everything you will pay over the life of the loan). This calculator computes all three for up to three loans at once, using the standard amortization formula: monthly payment = P × r(1+r)n ÷ ((1+r)n − 1), where P is the amount borrowed, r is the monthly interest rate, and n is the number of monthly payments.
The monthly payment is what fits — or does not fit — in your budget, so it matters. But the total cost is what the loan actually charges you, and that is the number this calculator uses to pick the cheapest loan. Two loans with the same amount and the same rate but different terms can have very different total costs: stretching a loan from 5 years to 7 years cuts the monthly payment by about a quarter and adds roughly 40% more interest. The table in the worked example below shows exactly how that trade-off plays out.
The comparison assumes a fixed interest rate and equal monthly payments for the full term, with no fees and no early repayment. Real loans differ in ways this calculator cannot see: origination fees, prepayment penalties, variable rates, and the fine print of the terms. A loan that looks cheapest on interest alone can lose if it carries a large origination fee, so use the comparison to shortlist offers, then read the fee schedule before signing anything.
Worked Example
Borrow $20,000 three ways. Loan A: 6.9% over 5 years — monthly payment $395.08, total interest $3,704.86, total cost $23,704.86. Loan B: 8.5% over 5 years — monthly payment $410.33, total interest $4,619.84, total cost $24,619.84. Loan C: 6.9% over 7 years — monthly payment $300.88, total interest $5,273.66, total cost $25,273.66.
Loan A is the cheapest overall, saving $914.97 against Loan B and $1,568.80 against Loan C. Loan C has the lowest monthly payment by far — $94.20 a month less than Loan A — but it is the most expensive loan in total, because two extra years of interest cost more than the lower payment saves. That is the central trade-off in loan comparison: the easiest payment to afford is rarely the cheapest loan to take.
Assumptions and What This Calculator Leaves Out
- It assumes a fixed interest rate for the full term. Variable-rate loans can cost more or less than the comparison shows.
- It assumes equal monthly payments with no missed payments, no extra payments, and no early repayment.
- It does not include origination fees, closing costs, prepayment penalties, or insurance the lender may require.
- It compares total cost only. It does not weigh the value of flexibility — a longer loan's lower payment can be worth paying for if your income is uncertain.
- It assumes the full loan amount is borrowed on day one. Lines of credit and staged drawdowns behave differently.
The worked example side by side:
| Loan | Monthly payment | Total interest | Total cost |
|---|---|---|---|
| A — 6.9%, 5 yrs | $395.08 | $3,704.86 | $23,704.86 |
| B — 8.5%, 5 yrs | $410.33 | $4,619.84 | $24,619.84 |
| C — 6.9%, 7 yrs | $300.88 | $5,273.66 | $25,273.66 |
A 1.6-point rate difference (Loan A vs Loan B) costs $914.97 over five years — about $15.25 a month. Two extra years at the same rate (Loan A vs Loan C) costs $1,568.80 — the term matters more than a modest rate difference.
How to Use This Calculator
Enter the amount, annual rate and term in years for each loan you want to compare. To compare only two loans, set the third loan's amount to 0 and it will be excluded. The results show each loan's monthly payment, total interest and total cost, mark the cheapest overall, and show how much more each other loan costs. Use the Reset button to return to the worked example.
Tips and Practical Advice
Start with the shortest term whose payment you can genuinely afford, and only stretch the term if the monthly payment is truly unmanageable. The extra interest on a longer loan is a real cost, not a rounding difference — in the example above, two extra years cost $1,568.80. If you do take the longer loan for the lower payment, you can recover most of the saving by paying extra whenever you can: voluntary extra payments go straight to the principal and cut both the interest and the term.
Compare the APR, not just the interest rate, when lenders quote you. The APR folds in most fees, so it is the fairer number for comparing offers from different lenders — and it is the number lenders are required to disclose. If two loans have the same rate but different APRs, the one with the higher APR has the bigger fees. Finally, get at least three quotes before choosing: in the example, the gap between the best and worst of three ordinary offers is $1,568.80, which is a lot of money to leave on the table for the sake of one extra phone call.
No lender rates are quoted on this page — every figure is calculated from the numbers you enter. Formula: monthly payment = P × r(1+r)ⁿ ÷ ((1+r)ⁿ − 1). Last reviewed: 13 November 2026.
Frequently Asked Questions
What is the cheapest loan — the lowest monthly payment or the lowest rate?
Neither on its own: the cheapest loan is the one with the lowest total cost. A longer loan has a lower monthly payment but usually costs more in total interest. In the example, the 7-year loan's payment is $94.20 a month lower than the 5-year loan's, but it costs $1,568.80 more overall.
How much does a 1% higher interest rate cost on a loan?
It depends on the amount and term. On a $20,000 loan over 5 years, moving from 6.9% to 8.5% — a 1.6-point rise — costs $914.97 more in total. Use the calculator with your own figures to see the exact cost for your loan.
Is a longer loan term ever a good idea?
Sometimes. A longer term's lower payment can be the right choice if your income is uncertain or you need the monthly breathing room — but you pay for it in extra interest. If you take the longer term, paying extra whenever you can recovers much of the saving.
Should I compare loans by interest rate or APR?
Compare by APR when the lenders quote it: the APR includes most fees, so it is the fairer comparison across lenders. The interest rate alone can hide a large origination fee. This calculator compares on rate and term; check the fee schedules separately.
Does paying extra on a loan save money?
Yes — extra payments go straight to the principal, which shrinks the balance that interest is charged on. Even a small extra monthly payment can save thousands in interest and shorten the term. Check that your loan has no prepayment penalty first.
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